LIFE INSURANCE RATES ABOUT TO GET PRICEY

I sneaked my first and last puff behind my parents' back when I was 8, an experience so foul I swore off cigarettes forever. I avoid animal fats and red meat and keep my cholesterol level and weight at what doctors call "ideal" levels, based on my age and body build. I have no symptoms, warning signs or personal or family history of cancer or heart disease.

After that, watch for term insurance rates to skyrocket or guarantees of level premiums to disappear, as insurance companies increase reserve requirements for term life insurance policies, some industry watchers say.

The reason: The so-called Valuing Life Insurance Model Regulation, or "Regulation XXX," adopted by the National Association of Insurance Commissioners that requires insurers to raise the reserves they set aside to cover claims.

Even if not all states approve the regulation -- Florida turned it down but is expected to revisit the issue in 2000 -- others will require companies that do business in their state to increase their reserve requirements for any policies they sell anywhere as of Jan. 1, 2000. In effect, the action by those states will affect consumers nationwide.

The NAIC, an association of state insurance commissioners, says the regulation -- nicknamed after the Roman numeral 30 because it was the 30th proposed regulation in a series -- protects consumers by making sure insurance companies can make good on the claims for death benefits.

"Clearly consumers deserve premiums that are not excessive," said George M. Reider Jr., Connecticut insurance commissioner and president of the NAIC. "However, consumers also deserve insurers that will remain solvent and be able to fulfill their contractual obligations I believe that the correct balance has been struck, and stand behind the need for this regulation."

Critics, on the other hand, claim the regulation is the result of lobbying by insurance companies to create an excuse to raise rates.

"This is something that is protecting insurance companies. It is not protecting consumers," said Byron Udell, president of AccuQuote, an insurance price-quote service.

Whoever is right, the bottom line for consumers is the same. Now is the best time, and perhaps the last time, to get a great deal on term life insurance before the new regulation goes into effect.

Even consumers who bought term-life insurance recently may be able to switch policies and lower their premiums now because of the "competitive price slashing going on" before the regulation takes effect, said David T. Phillips, president of InsuranceQuote Services, another price-quote service firm.

Term life insurance is pure insurance, with no savings feature or cash value, and typically provides the highest benefit for the premium dollar.

This benefit is for a particular period of time, or "term." After that, if you still want insurance, you must apply and qualify for a new policy. Because you would be older, you would expect your premium to be higher.

The cost of term life insurance has come down so much, however, that many new policies are costing less, even if you are older.

"I've bought a new policy each of the past five years and even though I am a year older each time, the price is lower every time I buy," said Udell, who is 41.

By far the most popular type of term life insurance is "level-premium" term, which typically provides coverage for 5, 10, 20 or 30 years at the same guaranteed rate or premium each year.

At first that rate is higher than what you would pay just for a year's coverage. But by buying a longer-term policy with a guaranteed rate you protect yourself against rising premiums as you get older. You also avoid the risk of failing to qualify for insurance later on.

And if you find a better deal elsewhere, you can simply walk away and switch to another policy. Coverage stops on the old policy, of course, but you don't have to keep paying the premiums and there is no cash value to lose.

Today a 40-year-old non-smoker in the best of health who qualifies for the "super-preferred" or "preferred plus" rating could buy a 20-year, $500,000 policy for as low as $420 to $425 a year, rates guaranteed, Udell said. Five years ago, the cheapest such policy cost $995 a year.

Rates have come down in part because people are living longer, Udell said, but mostly because of changes in the marketplace.

"You have tremendous competition and an unbelievable pool of information" through quote services such as his, Udell said. "Before, if you wanted a price, you had to call an agent. If a product came out, not many people knew about it."

Even with increased competition, industry watchers agree, the upshot of Regulation XXX will be to drive at least some rates up. In a followup column on Thursday, I'll suggest ways for consumers to get the best deal, and pitfalls to avoid.

Humberto Cruz can be reached c/o Sun-Sentinel, 1800 N. Commerce Parkway, Suite 1, Weston FL 33326 or at 954-356-4677 or e-mail hcruz@sun-sentinel.com or through his Web site at www.sun-sentinel.com/money/. All questions and tips will be considered but personal replies are not possible because of the volume of calls and mail.